Economic Report

United States of America

UNIVERSAL BUSINESS SCHOOL

Submitted to Prof. Yogesh B.
CONTENT LIST
The American Dream
Macroeconomic Factors - GDP, GNP TEAM 1 - MEMBERS
Currency & Exchange Rate Policies
Ashwini Sakure - PGDMFC15CM/2019
Federal Monetary Policies
Benaifer Pereira - PGDMFC15CM/2025
Federal Policies in case of downturn
Manan Mehta- PGDMFC15CM/2017
Income Disparity study
Navya Agarwal- PGDMBM4CM/2033
Human Development Index
Pradyumn Rawat- PGDMBM4CM/2038
Industrial Production Index
Ritvika Agarwal - PGDMBM4CM/2044
Inflation and USA
Tushar Patra- PGDMFC15CM/2015
Political System
Villa Sai Devi Prasanna - PGDMBM4CM/2058
Trade Policies
Vineet Govindani- PGDMIM3CM/2007
Aggregate Demand & Supply
Industrial Analysis of the USA
The US stock market
Unemployment in US
Impact of SARS-CoV'19
 THE AMERICAN DREAM

LEADER
Financial services, IT, Pharma, Oil
Currency = $
& Natural Gas, Infrastructure, De facto currency for many nations
Military Goods Records for about 70% of global trade.
(US Bureau of Economic Analysis)
MACRO
ECONOMIC
GDP & GNP
FACTORS US GDP = 17.65% of world economy
Nominal GDP - $21.427T (2019)
Per Capita Income - $55,809 (Annually)
Growth Rate - 2.3% (2018-19)
GNP - $17.442T
Kiplinger predicts a possible 4.9% slump for aggregate
GDP (2020) and a revival of 3.8% in 2021.
Morgan Stanley predicts a 3.5% slump for Q4 2020.

(US Bureau of Economic Analysis), US GDP 1960-2019 | 2020-2022 Forecast

RISE IN GDP 2010-2020
 GDP GROWTH PIE-CHARTS
GDP BY SECTOR GDP BY COMPONENT
Business Investment
17.1%

Others
20.9%

Govt. Spending
16.2%

Public Administration
9.9% Services Personal Consumption
55.1% 66.7%

Construction
2.9%

Manufacturing
9.2%
CURRENCY & EXCHANGE RATE
Free Floating Increased Inflation
Purely based on demand and
Raised interest rates.
supply.

Eases price stability, promotes low unemployment. Discourages demand in the market and economy.

Quantitative Easing Global effect

Most assets are traded in dollars
Creating inflow of deposits by
so fluctuations affect the global
buying assets from banks, investors.
economy.
Caps federal spending, raises asset prices and Since it is the de facto currency of the global
enhances wealth encouraging people to spend economy, the demand shoots the value high and
more. affects major sectors such as oil and commodity.
(Americanexpress)
FEDERAL POLICIES : DOWNTURN
FISCAL POLICIES
US $44 Bn relief package
Deferring social security tax collection
Student loan payment relief
Providing options to help renters and
homeowners avoid evictions and
foreclosures.
US $2.3T "CARES Act"
$560Bn as aid to tax-payers and individuals.
$510Bn to prevent corporate bankrupcy
$349Bn in forgivable Small Business Admin.
loans and guarantees to help small
businesses.
$100Bn for hospitals and healthcare.
$150Bn transfer to local and state Govt.
$483Bn paycheck protection programme -
COVID care and small business aid.
MONETARY POLICIES
Reduced interest rates by 150bps
(0.25% currently)
Providing loans to PSUs (cashflow
balance)
Insurances for - student loans, auto
loans, card loans and debt forms.
Central bank reimbursing money to
corporates.
12 Month loan moratarium period.
(Mortgage instalments).
(IMF SURVEY, 2006), (Congressional Research
Service - US Economy, Policies)
INCOME DISPARITIES : RICH VS POOR
Record disparity rate - 2019 (5 decade
high) and unemployment , poverty at
historic lows.
Wealthy regions - New York,
Connecticut, Washington DC
Poverty stricken - Lousiana, Puerto Rico,
Maine.
Gini Index increased from 0.397 to
0.485 (1967 vs 2018)
Increased income gap but national
median income touched $63k.
The Gini index measures wealth distribution across a population,
with 0 = total equality and 1 = total inequality, where all wealth is
concentrated in a single household.
(Telford, 2020)
MEASURING HUMAN DEVELOPMENT INDEX

(UNDP HUMAN RESOURCE INDEX)

HUMAN DEVELOPMENT INDEX
BASED ON
UN Population division, avg.
life expectancy = 78.9Y.
UNESCO stats of 16.3 years of
mean schooling.
World Bank (GNI) Per Capita
PPP of $56,140. (2011)

HDI VALUE = 0.920

Rank 15 out of 189
Between 1990-2018, US' HDI value jumped
from 0.860 to 0.920. (6.9% Increase)
 INDUSTRIAL PRODUCTION INDEX

The Industrial Production Index (INDPRO) measures real output for all facilities located in the United States
manufacturing, mining, and electric, and gas utilities (excluding those in U.S. territories)
Since 1997, the Industrial Production Index has been determined from 312 individual series based on the 2007 North
American Industrial Classification System (NAICS) codes.
These individual series are classified in two ways - market groups and industry groups.
The Board of Governors defines markets groups as products (aggregates of final products) and materials (inputs
used in the manufacture of products).
Consumer goods and business equipment can be examples of market groups. "Industry groups are defined as three-
digit NAICS industries and aggregates of these industries such as durable and nondurable manufacturing, mining, and
utilities
The index is compiled on a monthly basis to bring attention to short- term changes in industrial production,. It
measures movements in production output and highlights structural developments in the economy.
INDUSTRIAL PRODUCTION INDEX
Article title: Industrial Production: Total Index
Website title: Fred.stlouisfed.org
 INFLATION
Defined at rate of which prices of general goods and services rising, also indicates
the falling purchasing power of the currency.
Calculated using 12 month selection of Consumer Price Index (CPI).

1.4%
Annual Inflation Rate
2.3% in 2019. (US Inflation Calculator)
 Business Cycle:
The chart compares the inflation rate with the Expansion-  where real GDP grows for two or more consecutive
federal fund rate, business cycle phase and the quarters, moving from a trough to a peak.
significant event influencing inflation. Contraction- Generally occurs after the business cycle peaks,
but before it becomes a trough.

The Effect of Monetary Policy

The Fed focuses on the Consumer Price Index for All Urban
Consumers. It excludes volatile gas and food prices.
The Fed sets a target inflation rate of 2%.
The Fed can increase the federal funds rate, which is the rate at
which banks lend to each other overnight. (Reduce demand and
lower price)
The Fed can also lower the federal discount rate, which makes it
cheaper to borrow money from the Fed itself. (Increase demand
and raise prices)
Other tools that the Fed uses are reserve requirements, open
market operations and reserve interest.
(Source: The balance)
 The index for used cars and trucks continued to rise sharply
and accounted for most of the monthly increase in the
seasonally adjusted all items index.
The food index was unchanged, with an increase in the food
away from home index offsetting a decline in the food at
home index.
The energy index rose 0.8% in September as the index for
natural gas increased 4.2%

Not seasonally adjusted CPI measures

The CPI-U (Urban) increased 1.4 percent over the last 12 months
to an index level of 260.280 (1982-84=100).
For the month, the index rose 0.1 percent prior to seasonal
adjustment.

The CPI-W (Wage earners & clerical workers) increased 1.55 in

1Yr to an index level of 254.004 (1982-84=100).
For the month, the index rose 0.2 percent prior to seasonal
adjustment.
 US POLITICAL SYSTEM
Type of state Political Leaders
Federal Republic
Democratic
50 semi-sovereign
states POTUS- Donald Trump
Political Parties VP-Michael Pence 3 Branches

Legislative
Democratic Party
Executive
Republican Party
Judicial
INDICATOR OF POLITICAL FREEDOM
Provides an annual evaluation of the state of freedom in a country.
Survey measures freedom according to two broad categories:
Political rights
Civil liberties
The total score awarded to the political rights and civil liberties checklist
determines the political rights and civil liberties rating.
1 = Highest , 7= Lowest level of freedom
 CURRENT POLITICAL CONTEXT
American domestic politics 2018 mid-term elections-
remains highly polarized. majority in the House of
Representatives (235 seats
out of 435)

The campaign preceding

the November 2020 New democratic majority
Presidential election - Nancy Pelosi, President
promises to be of the Chamber
tumultuous.

Democrats have initiated an

The outcome of the
impeachment procedure
Democratic primaries remains
against President Trump
highly unpredictable
 US TRADE POLICIES
Since World War II, U.S. trade policy has generally sought to promote U.S. economic growth and
competitiveness by:

Reducing global trade and investment barriers.

Fostering an open, transparent, and nondiscriminatory rules-based trading system, including through the WTO.
Enforcing partner countries’ trade commitments and U.S. trade laws.
Offering relief to U.S. firms and workers adversely affected by “unfair” foreign trade practices and trade liberalization.

Economics of Trade U.S. Trade Trends

Economic theory holds that international trade can be
beneficial at the national level, but benefits and costs
can be unevenly distributed or concentrated.
Benefits of trade can include more efficient resource
allocation and greater productivity through competition,
economies of scale, higher wages and job growth in
exporting industries.
Costs can include job, wage, and firm losses through
competition from imports and relocation of production.
The US is the world’s largest economy, trader, and
source and destination of FDI.
The 2019 top U.S. trading partners were Canada,
Mexico, China, Japan, UK and EU.
Aggregate savings and investment; valuation of the
dollar and its role in global markets play a larger role in
determining the U.S. trade deficit than trade policies or
agreements.
 US TRADE POLICY COMPONENTS
•Congress sets U.S. trade negotiating objectives, enacts trade laws, programs, and agreements, and
oversees executive trade functions conducted by a range of federal agencies.
•Key policy components include:
Trade rules-setting,
Liberalization, and enforcemen
Export promotion and controls.
Customs, trade remedies, trade adjustment & trade preferences
Investment.

US Trade Laws and Policy Tools Trade Promotion Authorities

US Gov. highlights trade deficit as a sign of unfair trade
practices for the US economy and assertively enforces
U.S trade laws.
By 1995, WTO was formed and brought in a dispute
settlement syatem and removal of trade barriers.
U.S trading partners have retaliated by enforcing tariffs,
negotiating exceptions in terms of quota and launching
WTO complaints. One such incident is where WTo ruled
that U.S Sec. 301 tariffs on China violated WTO norms.
Congress and the President work together and
implement trade agreements. (Reciprocal Agreement
Act, 1934).
To combat non-tyariff trade barriers, Congress adopted
fast track in the Trade Act 1974 to provide U.S an udge
in negotiating objectives and expedited legislative
consideration for implementing bills on future trade
agreements, also preserving its' constitutional
prerogatives.
AGGREGATE
DEMAND
Aggregate demand is the total demand of all goods and services produced by
an economy over a given period.

Driving factors:
Monetary Expansion
Decreased interest rates
Source: Focus Economies
Higher income rates

FORMULA -> AD = C + I + G +(X-M)

Calculated as per 2019 stats:
C = Personal Consumption Expenditures of $14.56 trillion.
I = Gross Private Domestic Investment of $3.74 trillion.
G = Government Consumption Expenditures of $3.75 trillion.
(X-M) = Net Exports of Goods and Services of -$0.63 billion.
Aggregate Demand in 2019= $21.49 trillion. 
AGGREGATE
SUPPLY
Aggregate supply is the total number of all goods and services produced by
an economy over a given period.

Driving factors:
•Labor
•Capital goods Source: Focus Economies
•Natural resources
•Entrepreneurship.

The aggregate supply or GDP of the United

States is one of the largest in the world.
 INDUSTRIAL ANALYSIS
Agriculture Banking
MARKET SIZE: $3 TRILLION MARKET SIZE: $11 BILLION
NUMBER OF BUSINESSES: 2,761,533 NO. OF BUSINESSES: 62
INDUSTRY EMPLOYMENT: 6,826,933 INDUSTRY EMPLOYMENT: 4,515
Manufacturing
MARKET SIZE: $2.33 TRILLION
NO. OF BUSINESSES: 249,962
INDUSTRY EMPLOYMENT: 12.8M

Biggest Companies Biggest Companies Biggest Companies

•Sysco Corporation JP Morgan Chase and Co •Align Tech. Inc.
•Tyson Foods Inc. Bank of America Corp Patrick Industries Inc.
•Cargill Inc. Wells Fargo & Co Thor Industries Inc.
 AGRICULTURE SECTOR
Agriculture and its related industries provide 10.9%
of total employment in the country.
Farming accounts for about 1% of the U.S. gross
domestic product.
Only 2% of the population of the USA works in the
farming sector.
Due to the ongoing trade wars, changing workforce,
and climate change, the industry faces a threat.
The U.S. Department of Agriculture supports the
industry with subsidies, loans, and technical
assistance.
US STOCK
MARKET
NYSE + NASDAQ

NYSE : World's largest stock exchange
Location: 11 Wall Street, New York City, New York, U.S.
Founded: May 17, 1792
Market Cap: US$ 21.4 trillion
Indices: DJIA , S&P 500
Trading Hours: 9:30 to 16:00 (EDT)
NASDAQ: World's 2nd largest stock exchange
Location: One Liberty Plaza, Manhattan, NY City, U.S.
Founded: Feb 4, 1971
Market Cap: US$ 17.25 trillion
Indices: DJIA , S&P 500 , NASDAQ Composite
Trading Hours: 9:30 to 16:00 (EDT)
 STOCK MARKET
NASDAQ COMPOSITE
INDICES
NASDAQ COMPOSITE.
Launched in 1971
Includes almost all stocks listed under NASDAQ
Weighted towards companies in the IT sector.
(Source: The Wall Street Journal, NASDAQ)

Looking at its performance in the last

one year, The NASDAQ hit the lowest point
on 23rd of March where the death tool
kept mounting amid the COVID 19
pandemic. Since then it showed a steady
increase, where on 2nd of September, it
closed at the highest of the year, where it
was up by 1.1%. As of 24th Oct. 2020
11548.28 points.
 STOCK MARKET
Dow Jones Industrial Average
INDICES
Founded in 1885. DOW JONES INDUSTRIAL AVERAGE
Measures performance of 30 large US companies.
Maintained by S&P Dow Jones Indices.
Although commonly used, is considered
inadequate as it considers only 30 companies.
(Source: The Wall Street Journal)

DJIA, in the last year hit a low on 22nd

of March amid the COVID 19 pandemic,
where it closed down 3.1% and it hit
the highest on 12th of February where it
closed with an increase of 275
points.
 STOCK MARKET
S&P 500 Index
INDICES
Founded in 1957. S&P 500 INDEX
Measures performance of 500 large US
companies listed on the stock exchange -
Microsoft, Berkshire Hathaway, Amazon etc.
Operated by S&P Dow Jones Indices.
(Source: The Wall Street Journal, New York Stock Ex.)
Looking at S&P’s performance last
year, on 2nd of September it gained 0.80,
to end at 3526.65 marking its record close
year to date. The largest gainer being L
Brands Inc. In the third week of march, S&P
500 fell 15% making it the worst week since
2008.
 UNEMPLOYMENT
HISTORY OF UNEMPLOYMENT
•The great depression of the early 1930s had an
unemployment rate of 23.6%.
•Started tracking unemployment in the 1950.
•Since 1948, US has experienced 11 recessions.
•In the early 1980s, the unemployment rate reached a peak
at 10.8%.
•It came down to 5.3 in President Ronald Reagan Era but
again went up 7.5% in President G.W. Bush’s era
•The great recession pushed it above 10% , it came below
8% after Sept. 2012
FRICTIONAL UNEMPLOYMENT
Caused by temporary transitions workers make
1 when changing jobs.
Also caused due to refraining of hiring of
workers..
STRUCTURAL UNEMPLOYMENT
Caused by mismatch of demographic or industrial
2 composition of local industry.
Advancement in technlogy is one of the causes,
leads to decline in older industries.
CYCLICAL UNEMPLOYMENT
Occurs when there's not enough demand for
goods and services in the economy to create jobs.
3 In this case the business contracts even further as
the unemployed consumers have less money to
spend on goods, causing unemployment.
 MEASURES TAKEN
When unemployment rate goes above 6%, Govt. takes
actions in form of monetary & fiscal policies

FISCAL POLICIES MONETARY POLICIES

Cut down taxes for businesses and individuals
Controlled by Federal Reserve Bank
to increase spending.
Reduced interest rates to promote cheaper loans.
Increase federal spending in select industries
Increasing money circulation by buying various financial
Unemployment benefits for basic needs.
instruments to pump in more money in the economy
Driving retailerrs and manufacturers to hire
more people.
UNEMPLOYMENT
Source: U.S. Bureau of Labour Statistics
 IMPACT OF SARS-COV'19
Personal 15 Million Jobs
GDP Decrease
4.8% - Q1 2020, 31.4% in Q2
Consumption Ex. lost
(Televisory, Institutional Investor) 7.6% during Q1-2020 Massive surge in income cuts.
Includes demand of goods and services (BBCNEWS)

Trade deficit jumped National debt Exports dropped

11.6% - $44.4B rose to $26.2T. by 9.6% - $188B
De facto currency for many nations From $21.75T in 2019 Worst since November 2016
(McKinsey)
(McKinsey) (BusinessLine)

225K Dead, 8.7K Infected